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Sainsbury's Group Interims: 1% Decline in Like-For-Like Sales

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Sainsbury's has reported interim results for the 28 weeks to 21 September 2019, advising of increased grocery momentum as the company creates one multi-brand, multi-channel business.

Abbreviated Financial Highlights 

- Group sales of £16,856 million, down 0.2 per cent

- Retail sales (excluding fuel) down 0.6 per cent

- Like-for-like sales (excluding fuel) down 1.0 per cent

- In line with guidance, underlying profit reduced by £41 million to £238 million due to the combined impact of the phasing of cost savings, higher marketing costs and tough weather comparatives 

- As set out at the Capital Markets Day, we have reviewed our store estate, leading to £203 million of largely non cash one-off costs recognised in this half. Total one-off costs in the first half are £229 million, resulting in statutory profit before tax of £9 million. We continue to expect the total cost of the property strategy programme to be in the range of £230 million to £270 million

- Underlying earnings per share down 16 per cent to 7.9 pence

- Net debt reduced by £568 million to £6,778 million, reflecting the above cash generation. As in previous years, net debt at half year benefited from working capital phasing which will reverse in the second half. We have committed to reduce non-lease net debt by at least £750 million in the next three years from £1,522 million and expect a reduction of at least £300 million in 2019/20

- Unique opportunity to structurally reduce costs by c.£500 million over five years as we integrate Sainsbury’s and Argos, in addition to ongoing cost savings to cover the impact of cost inflation

- Interim dividend of 3.3 pence per share, up 6 per cent, in line with our policy of paying 30 per cent of prior full year dividend. Full year dividend policy will change to 1.9x cover by underlying earnings (versus 2.0x previously) to offset the dilutive non cash impact of IFRS 16 on underlying earnings

Abbreviated Operational Highlights

- Positive momentum in Grocery market share and sales performance, driven by a strong customer response to lower prices and our new value brands. We launched 123 new value brand products, with 200 due by the end of the financial year

- We continue to improve Sainsbury’s service and availability and customer satisfaction scores 
increased by more than three percentage points year on year

- We are investing in technology to make shopping easier and SmartShop handheld self-scanning technology is now in over 350 supermarkets

- We are investing in our store estate and have improved 172 supermarkets and 158 convenience stores this half. We will improve 450 supermarkets and 200 convenience stores this financial year 

- Clothing and General Merchandise performance improved quarter on quarter as comparatives normalised. We are bringing Sainsbury’s and Argos closer together to give customers easier access to all our products and services

- Following a strategic review of Financial Services, we no longer sell mortgages, are reducing costs and are focusing on digitally-led products and services for Sainsbury’s and Argos customers

- We successfully launched digital Nectar nationwide, creating a platform for greater personalisation and reward. 2.1 million customers are now using the Nectar app

- We became the first retailer to remove single use plastic produce and bakery bags and have committed to reducing our plastic packaging by 50% by 2025


- Argos sales grew ahead of the market and Fast Track delivery and collection continue to grow

- We have converted 176 Argos stores to our digital format this half and we will convert the majority of the remaining stores by the end of the year. Pay@Browse is now available in 362 Argos stores

Commenting on the Interim Results 2019, Mike Coupe, Chief Executive, said:

“We have created positive momentum across the business through strategic investments in our customer offer. We have lowered prices on every day food and groceries, launched a range of value brands and are more competitive on price than we have ever been.  We are investing in hundreds of Sainsbury’s and Argos stores, introducing new products and services and continually improving service and availability. As a result, customer satisfaction has increased significantly year on year.

“We have set out our plan to create one multi brand, multi-channel business. This will make the combined Sainsbury’s and Argos offer much more accessible for customers and gives us the opportunity to make our business more efficient. We offer great quality at affordable prices with convenient ways to shop. I would like to thank colleagues for all their hard work at this busy time of year. We are very much looking forward to delighting our customers throughout the upcoming festive period.”

Source : Insight DIY Team and Sainsbury's

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07 November 2019

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